The State and Enterprise

The relationship between state and enterprise has been at the heart of public policy debate for many years. There was the Nineteenth Century Liberal idea, reformulated in the Twentieth by the Libertarians, that the relationship between the two is necessarily antagonistic: The activities of the State discourage enterprise through regulations, taxes and by subsidising inefficiencies. On the other side, there were the Twentieth century ideas of the Welfare State, rediscovered as the 'Entrepreneurial State' in the Twenty-first, which posited the opposite: That the state and enterprise live in a symbiotic relationship, not just because the State creates the right environment, but also because it can enable the enterprise, by spreading education, improving health and supporting fundamental scientific research.

Both are plausible arguments, and adequate empirical and anecdotal evidence can be marshalled to support either. The debate, however, has been deeply ideological, and it was conducted less to find common ground and more to 'win' the battle. However, this contest is unwinnable: One can't really argue against the bureaucratic indifference of a state-owned airline by citing the research contributions of a state-funded university. Besides, all nuances, such as Hirschmann's insightful analysis about why the coexistence of public and private in a sector necessarily leads to inefficiencies in the public offering, have received scant attention. There are no middle ways to be allowed in this debate - it is a with-us-or-against-us issue!

However, I may have already betrayed my lack of ideological commitment. Growing up in India, both sides of the argument were immediately obvious: The large family-owned businesses cornered everything and encouraged little innovation, and were only kept in check by Government meddling, while the public sector itself was soulless and unquestionably inefficient. There was no contradiction if one chose a Public university over a private one, but abhorred the Government-run airline. One could see the foundational role Nehruvian state had come to play even from the vantage point of its ultimate overreach, as the graduates of Indian Institute of Technology (IIT) built the new telecommunications infrastructure while their colleagues built the Indian IT companies and led the pushback against the bureaucracy.

However, I felt the need of a clearer stance as I recently got involved in a city development initiative in India. My opening gambit was that this is an 'ask not' moment, that Citizens need to take the lead in the initiative and not be beholden to their government to do the things for them. Indeed, this was the only way to create a new conversation. Most Indian state governments, though they have adopted the slogans of economic development, have no clue how to bring it about. The only trick they know is to hold 'investment summits' where foreign investors are wined and dined, and made to sign MoUs with inflated and unrealisable promises, which never resulted in anything other than news headlines. Our sole objective was to move the conversation away from the government and bring entrepreneurial networks to the fore, and to develop linkages that mean something real.

As I figured out, however, that this is an impossible thing to do in India. The ghost of the Nehruvian state is alive and well, and despite all the talk of Enterprise, the developmental conversations in India, at least in most cases, are still state prerogative. Laughable as it may be, the unquestioned assumption is that the State will develop Enterprise. Indeed, the world would have been a different place if that would be possible, but it is hard to cut through a mindset shaped by decades of dependence. Surely, it is impossible to think otherwise where business chambers are primarily funded by the government and businesses which claim themselves to be entrepreneurial live at the pleasure of bureaucrats handing out government contracts: In that world, all talk of the enterprise is really another attempt to please the state.

This is where the State-vs-Enterprise becomes an either-or question. My earlier naiveté that it can be both is at least not true in this case. Clearly, the patronage of the state outweighs the imperatives of the entrepreneurial ecosystem, shutting out the disruptive and the critical. I had to see it for what it was - my enthusiasm for city development being channelled to please the government and project the international reach of my sponsors - forcing me to take sides: The state may play a foundational role in creating the entrepreneurial ecosystem, but it doesn't do so willingly or deliberately; rather, it does so when the Citizens take the lead in shaping the agenda and seizing the initiative. The state never fosters enterprise when privileges could be handed out to a small privileged group with access. In that setting, 'Enterprise' is really an empty slogan, meant to get column inches and not jobs or businesses. The state may seize the rhetoric of enterprise, with a few willing vassals who would play along - but this is as anti-entrepreneurial a setting as anything can be. 


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